China airlines refuse to pay EU carbon tax as 'trade war' looms

Chinese airlines have made a stand against the new EU Emissions Trading Scheme - by refusing to pay it.

The scheme came into effect this week, and has caused controversy throughout the airline industry.

It has been introduced to put a cap on aviation emissions and reduce greenhouse gases that contribute to climate change.

From the beginning of this month, any airline using an airport in the EU has to pay it.

But Cai Haibo, deputy secretary-general of the China Air Transport Association, which represents China's four leading airlines - Air China, China Southern Airlines, China Eastern, and Hainan Airlines - says it would cost its passengers 800m yuan (£78 million) in the first year, trebling within 10 years.

He told the Guardian: "China will not cooperate with the European Union on the ETS, so Chinese airlines will not impose surcharges on customers relating to the emissions tax."

Conequences for not paying the tax are 100 euro fines per every tonne of carbon dioxide or, ultimately, being banned.

China believes the tax is 'unreasonable', and that the cost of reducing carbon should be down to aircraft manufacturers as an incentive to produce more efficient and environmentally-friendly planes.

Carbon fees do not have to be paid until March 2013, so there is still time to find a solution.

But Chinese airlines are already investigating legal action against the EU, as well as asking for 'retaliatory measures' from the Chinese government.

These could come in the form of China purchasing less Airbus aircraft, and creating the aforementioned 'trade war'.

The EU tax has not been favourably met by the US either, while Australia's Qantas has also threatened to sue.

It has also caused an outcry with British passengers who already face paying the highest Air Passenger Duty in Europe.